Agriculture in Netherlands vs. Romania
Romania Netherlands
GDP Euro 140 billion Euro 600 billion
Arable land 9.5 million ha 1.8 million ha
Professional farmers(working > 5 ha)
265 000 67 000
Agriculture exports Euro 4 billion Euro 78 billion
Arable land prices Euro 2 500 – 5 000 /ha Euro 40 000 /ha
Total loans to the agricultural sector 2013
Loans Average Debt / farmer
Romania Euro 3.5 billion 1 300 Euro
Netherlands Euro 40 billion 600 000 Euro
Total agricultural loans in Romania
2012 2013 Aug. 2014
75% granted by banks 10 613 10 879 11 600
annual growth rate 3%
25% granted by Non-Bank Financial Institutions (NFI)
2 847 3 501 4 006
annual growth rate > 20%
*Commercials credit (offered by agribusiness players) is estimated at RON 2.5 – 3 billion per year.
Million RON
What is being financed?
Working Capital Needs (Banks, NFI, Commercial Credit)
66%
Investment Loans Equipment (NFI) Projects with European grants (Banks) Others, such as arable land
acquisitions (Banks, NFI)
33%
Extension of the
agricultural area
Milling bakery
Energy (biogas wind)
Silos Trade in cereals FNC
Agricultural
service delivery
Livestock breeding
(pigs, cows)
Vegetable and fruit
growing
Development
» Defensive» Low risk» Moderate increase in cost efficiency» Liquid fixed assets and an increasing trend in the market value during the next period» Facilitates the densification of land
▪ Increases the indebtedness▪ Investment paid off in the long term▪ The market becomes extremely competitive, decreasing negotiation power
Acquisition of agricultural land
» It may generate a significant profitability in the future» Multiplies the profit centers» Limitation of the specific seasonal character» Using renewable resources» A market with a growth potential in the future» Possible access to non-reimbursable funds
▪ High risk▪ Increase in exposure, significant investments▪ Low expertise level, it does not depend on the underlying activity▪ Dependent on tax incentives that are highly uncertain
Energy (biogas, wind)
» Defensive» Storage» Immunity» Allows a better capitalization on one’s own production» Possible access to non-reimbursable funds
▪ Average risk▪ Increase in exposure, significant investments▪ Money blocked▪ Risk of extra capacity▪ The risk of deterioration of the production stored is taken over
Silos for one’s own needs
» Integrated model» Average profitability» Legal limitations that are to reduce the access to the market of the small producers, generating growth opportunities» A market with an increase potential» Possible access to non-reimbursable funds» The integration of activities related to large crops increases profitability
▪ Average risk▪ Expenses on initial investments▪ Liberalization of the milk market in 2015, pressure of imports
Livestock breeding (pigs, cows)
» Integrated model» Low risk» Average profitability» Market with an increase potential» Possible access to non-reimbursable funds
▪ Expenses on initial investments▪ Pressure on the price by imports
Fruits and vegetables growing
Distribution of development options
Low risk High risk
High profitability/ efficiency
Low profitability / efficiency
Energy
InputsLivestock breeding
Silo
Services
Vegetable growing Fruit growingLand
Shops
FNC
Trade
Milling, bakery
In conclusion, Romanian agriculture
Has great potential for improving performance Can contribute significantly more to economic development
and export growth Is hugely under-financed both in terms of working capital
needs and investment loans Will benefit from a significant increase in European
funds/subsidies
NFI’s are ideally placed to satisfy the farmers needs for credit
Specialized loan providers, understanding the farmers business
Can provide fast, innovative and flexible credit solutions Better collateral valuation Better collection mechanisms